Monsoon balm: normal rainfall could bring relief to rural economy

India’s meteorological department and private weather forecaster Skymet predict a normal monsoon this year should offer some relief to the rural economy, which has seen wage growth stagnate even as price pressures have increased. The increase in wages, in nominal terms, of non-agricultural workers stood at 5.9% in February 2022 compared to February 2021, while that of agricultural workers was 4.8%. On the other hand, rural inflation for March 2022 was 7.7% due to rising food inflation, compared to 6.4% in February.

It is no wonder that demand for basic consumer goods in rural India, as well as sales of two-wheelers, have been weak in recent months. Add to that the growing cloud of consistently high fuel prices and rising fertilizer prices as the kharif season approaches – thanks in large part to Russia’s war on Ukraine – and there’s a healthy dose uncertainty around rural growth. Some experts even believe that more expensive fertilizers could drive up food inflation – which has more than doubled in rural areas since March 2021 – despite a normal monsoon. Against such headwinds, a lower than normal monsoon would have made the pain worse.

Agriculture’s share of the country’s gross value added may have fallen to 18.5%, but 55-60% of its contribution to the economy comes from dryland farming. More than half of the country’s net cultivable area of ​​141.4 million hectares is not irrigated and depends on rain. More than three-fifths of Indian farmers grow crops without irrigation. It is this segment that seeks deliverance through normal rains. Normal rainfall bodes well for higher cereal production during the kharif or summer season when crops are planted in June and July. Sufficiently high grain production could of course reduce the chances of agricultural commodity prices remaining high. Over the past decade there have been five years of normal (2016 and 2021) and above normal (2013, 2019 and 2020) rains in which agriculture and related activities have increased to an annual average of 4.9% after adjusting for inflation. This is much more than when rains were below normal (2012, 2017 and 2018) and insufficient (2014 and 2015) when average agricultural growth was 2%.

While increased production doesn’t always mean more income for farmers – and farm and off-farm labor – this year could be different, especially from the perspective of oilseed growers. Given that vegetable oil prices have risen sharply due to supply disruptions – India imports more than half of its needs and Ukraine is a major producer of sunflower oil – a bumper crop could not only lower domestic oil prices, but also translate into significant revenue gains for their country. producers. Higher farm incomes could boost demand for FMCG products, two-wheelers, tractors, etc. Good rains thus reinforce the overall growth momentum of the Indian economy. Besides, a good monsoon would also mean healthy soil moisture for the rabi planting season at the end of the year.

However, it is necessary to temper the predictions of a normal monsoon with the pattern changes caused by global warming. A few years ago, scientists from the Center for Mathematical Modeling and Computer Simulation observed decreasing trends in the quantum of precipitation before and after the monsoon and the number of rainy days, implying a shorter monsoon. While the number of rainy days is decreasing, the incidence of very heavy and extremely heavy rains has increased, which could have its own deleterious effects. To account for monsoon-related uncertainties – even when the global quantum is “normal” – the government should focus on building irrigation and storage capacity. There is a long way to go as the share of irrigated land has only reached 45% compared to less than 20% in the 1960s. Until this intensifies, especially in the Indian peninsula, the fortunes of the economy will remain hostage to the vagaries of the falling rains.

About Keneth T. Graves

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